China threatens to add tariffs on US energy exports

China said it will retaliate against new US tariffs and threatened to add a second round of tariffs targeting US exports of crude and coal if the two countries' trade dispute further escalates.

"China does not want to fight a trade war. But China has to respond strongly, in the face of the short-sighted behaviour by the US," China's commerce ministry said on 15 June after the US announced that that it will impose a 25pc tariff on $34bn/yr of Chinese exports starting on 6 July.

"We will immediately introduce taxation measures of the same scale and the same strength. All the economic and trade achievements reached by the two parties will become invalid," the ministry said.

The US is targeting 818 industrial and technology categories that it says have been harmed by intellectual property theft. The US also proposes to tax a further 284 categories worth another $16bn/yr at 25pc that could take effect later after public comment.

Beijing will retaliate with duties on $34bn/yr of US exports including automobiles, chemicals and soybeans that take effect on 6 July. Its commerce ministry said it will also consider adding tariffs on another $16bn in US exports, targeting energy exports like crude, gasoline and diesel. The list also includes coking and thermal coal, metallurgical coke, semi-coke and petroleum coke.

The tariffs will reverse informal efforts to reduce the US trade deficit with China. After high-level discussions between Washington and Beijing last month, US treasury secretary Steven Mnuchin said US energy exports could increase by $50-60bn/yr and agricultural exports could increase 35-40pc this year.

A 25pc tariff on US coal will end China's policy discussions to reduce or eliminate its 3pc import tax on US coking coal imports to improve supply security. Chinese economic planning agency NDRC had consulted with coal trading firms about importing more US coking coal, market participants said. China imported 2.8mn t of US coking coal in 2017 after taking no US coking coal in 2015 or 2016. China imported 304,938t of US thermal coal in January-March, nearly as much as the 2017 total of 353,554t.

China last month said it will cut import duties on most automobiles to 15pc from 25pc starting 1 July, which could support flat steel demand in countries that export automobiles to China. Now China said it could impose tariffs of 25pc on vehicles including electric and hybrid electric, off-road and small passenger cars.